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CARO 2020 — all 21 clauses, automated.
The Companies (Auditor's Report) Order 2020 expanded the auditor's reporting matrix from 16 clauses under CARO 2016 to a comprehensive 21-clause regime that covers property title deeds, benami transactions, statutory dues, fraud reporting, default on borrowings, and subsidiary qualifications. Audit Suite handles every clause — applicability rules, prompts for evidence, draft observation language, and a final report on your firm's letterhead.
All 21 clauses of CARO 2020
| Clause | Subject | What we automate |
|---|
| (i) | Property, Plant & Equipment | FAR maintenance, physical verification, title deeds, revaluation, benami flag. |
| (ii) | Inventory | Physical verification frequency, discrepancies > 10%, working capital limits from banks. |
| (iii) | Loans/Investments/Guarantees | To related parties, terms, repayment regularity, overdue amounts. |
| (iv) | Sections 185 & 186 | Director loans, inter-corporate deposits compliance. |
| (v) | Deposits | Section 73-76 compliance, RBI directives, deemed deposits. |
| (vi) | Cost records | Section 148 maintenance check. |
| (vii) | Statutory dues | GST, PF, ESI, TDS, Income tax, Customs — undisputed and disputed dues. |
| (viii) | Undisclosed income | Income surrendered or disclosed under Income Tax Act. |
| (ix) | Default on borrowings | Default in repayment to banks/FIs, wilful defaulter, term loan utilisation. |
| (x) | IPO / FPO / preferential allotment | End-use of funds, compliance with Section 42 / 62. |
| (xi) | Fraud | Section 143(12) reporting, whistle-blower complaints, fraud against company. |
| (xii) | Nidhi Company | Net Owned Funds, deposit ratio, default in deposit repayment. |
| (xiii) | Related-party transactions | Section 177 / 188 compliance, AS 18 / IND-AS 24 disclosures. |
| (xiv) | Internal audit system | Section 138 applicability, internal audit reports considered. |
| (xv) | Non-cash transactions with directors | Section 192 compliance. |
| (xvi) | NBFC registration | RBI Act Section 45-IA registration, principal business test. |
| (xvii) | Cash losses | Current year and immediately preceding year. |
| (xviii) | Resignation of statutory auditors | Issues raised by outgoing auditor, taken into consideration. |
| (xix) | Material uncertainty (going concern) | Financial position, ratios, ability to meet liabilities. |
| (xx) | CSR | Section 135 compliance, unspent amount transfers. |
| (xxi) | Subsidiary qualifications | Holding company rollup of CARO observations from component auditors. |
CARO 2020 applicability — who's in, who's out
CARO 2020 applies to every company audit under the Companies Act, 2013 — including foreign companies — with a defined set of exclusions:
- One-person companies and small companies (Section 2(85))
- Banking companies (governed by Banking Regulation Act, 1949)
- Insurance companies (governed by Insurance Act, 1938)
- Section 8 companies (formed for charitable purposes)
- Private limited companies meeting all three Section 143(11) thresholds: paid-up capital and reserves not exceeding ₹1 crore at the balance sheet date; total borrowings not exceeding ₹1 crore at any point during the year; total turnover not exceeding ₹10 crore for the year
Note: The Section 143(11) thresholds are cumulative. If the company breaches any one of the three, CARO 2020 applies for the full financial year. Audit Suite asks for these three figures at engagement setup and tells you immediately whether CARO is in scope.
Sample CARO 2020 report — what gets generated
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under "Report on Other Legal and Regulatory Requirements" of our report of even date)
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its Property, Plant and Equipment.
(b) Property, Plant and Equipment have been physically verified by the management at reasonable intervals. No material discrepancies were noticed on such verification.
(c) The title deeds of all immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the Company.
(vii) (a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Goods and Services Tax, Cess and other statutory dues to the appropriate authorities…
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid statutory dues were outstanding for a period of more than six months from the date they became payable.
(xi) (a) To the best of our knowledge and according to information and explanations given to us, no fraud by the Company or fraud on the Company has been noticed or reported during the year.
(b) No report under sub-section (12) of Section 143 of the Companies Act has been filed in Form ADT-4 with the Central Government during the year.
… and similarly for clauses (ii) through (xxi). The full DOCX is generated on your firm's letterhead with the partner's name, membership number, and UDIN field.
What's new in CARO 2020 vs CARO 2016
CARO 2020 wasn't just renumbered — it was substantially expanded by the MCA in response to several high-profile audit failures in the late 2010s. New clauses added: revaluation of PPE, benami transactions (clause i), income surrendered under Income Tax Act (clause viii), wilful defaulter status (clause ix), end-use of IPO proceeds (clause x), expanded fraud reporting under Section 143(12) (clause xi), cash losses (clause xvii), outgoing auditor's issues (clause xviii), going concern uncertainty (clause xix), and the new holding-company rollup of subsidiary qualifications (clause xxi).
Frequently asked questions
Does CARO 2020 apply to every company?
No. CARO 2020 does not apply to OPCs, small companies, banking companies, insurance companies, Section 8 companies, or private limited companies meeting all three Section 143(11) thresholds (paid-up + reserves ≤ ₹1 cr, borrowings ≤ ₹1 cr at any point, turnover ≤ ₹10 cr). Audit Suite checks applicability at engagement setup.
What is new in CARO 2020 compared to CARO 2016?
CARO 2020 added clauses on revaluation of PPE, benami transactions, undisclosed income, end-use of public-issue proceeds, default on borrowings, expanded fraud reporting, internal audit, cash losses, and the holding-company subsidiary rollup. Many existing clauses were also expanded.
Can Audit Suite generate a draft CARO report?
Yes. Once you answer the clause-wise prompts with your observations and the company's particulars, Audit Suite composes a draft CARO 2020 report in DOCX format on your firm's letterhead. The auditor finalises the language — the software eliminates the typing, not the judgment.
How does CARO 2020 interact with consolidated financial statements?
Clause (xxi) requires the holding company auditor to report qualifications, adverse remarks, or matters of emphasis from CARO reports of subsidiaries, joint ventures, and associates. Audit Suite captures component auditor observations and rolls them into the holding company's clause (xxi) reporting.
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Used by CA firms across India for CARO 2020 reporting
CARO 2020 applies to every company audit except small companies, OPCs, and certain banking/insurance entities — which means almost every audit that sole proprietor CAs, small CA firms and mid-sized practices in India sign. Audit Suite is the CARO 2020 software those firms reach for, because the applicability matrix, the 21 clause prompts, and the auto-drafted report are all in one place. CARO 2020 sign-offs from Hyderabad, Bangalore, Mumbai, Delhi NCR, Chennai, Pune, Kolkata, Ahmedabad, Jaipur, Kochi and Coimbatore run through this workflow.
Looking for CARO 2020 software in Hyderabad / Bangalore / Mumbai / Delhi / Chennai / Pune / Kolkata / Ahmedabad / Jaipur / Kochi / Coimbatore? Audit Suite is a cloud product — every CA firm gets a dedicated workspace and works from any browser, anywhere in India.
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